Wednesday, December 2, 2009

Chuck Schumer v. Adidas: A Case Study in Moronic Protectionism

Sen. Chuck Schumer (D-NY) has decided to employ his superpowers as a US Senator (and chairman of the Democratic Senatorial Campaign Committee) to pressure the NBA to drop Adidas as its official uniform supplier because the German(!) company has decided to move its production of NBA game-day jerseys from upstate New York to Thailand. The AP delivers the big news:

A U.S. senator from New York doesn't want NBA players taking to the court wearing jerseys made in Asia.

"Basketball is an American game," Sen. Charles Schumer said.

Schumer planned to publicly urge the leadership of the NBA on Sunday to intervene and stop Adidas from moving production of the league's official uniforms to Thailand, or pull out of its contract with the sports apparel giant.

Schumer said not only is "an all-American product" at stake, but also about 100 jobs at American Classic Outfitters' factory in upstate New York, where more than half the uniforms worn by Kobe Bryant, LeBron James and other NBA players are manufactured.

Adidas has said that it plans to outsource its jersey production to Thailand, breaking a multiyear contract it had with the Perry, N.Y.-based company.

"My concern is that the jobs are going to go away and there are certain places where you have to draw the line," Schumer said in a phone interview Saturday. "And this is one of them."

Last week, Schumer called on Adidas to reverse its decision and to continue making the uniforms in the United States. The senator said he is turning his attention to urging the NBA after getting a lukewarm response from Germany-based Adidas.

"My main thrust here is to ask the NBA to join this campaign," he said, adding that he spoke with National Basketball Association Commissioner David Stern on Saturday. "My impression is that he wanted to be helpful."

The NBA didn't respond to requests for comment Saturday night.

Protectionist strong-arming is nothing new for Sen. Schumer, and the latest reports are that Commissioner Stern - a bigtime Democrat donor - has reached out to Adidas, but Adidas has thus far rebuffed the Senator's demands. So this little spat hardly qualifies as "big news." That said, it has all the elements of classic protectionist idiocy and comes from one of the Senate's loudest protectionist, ahem, members, so I'm going to give the story the fisking it deserves, element by element.

What Schumer doesn’t get is that what really “sticks America in the eye” is his protectionism. Outsourcing is a good thing. When companies go abroad, they do it because the cost savings allow them to make better products for less. This means more profit for the company and lower prices for all American consumers and businesses.

Lower prices lead directly to higher standards of living. More profit leads to new investment -- often in America. Both lead to increased jobs. A Dartmouth Business school study found that companies that outsource the most are the companies that create the most employment in America.

Schumer, like many of his colleagues, doesn’t understand economics. If he really wanted Adidas to stay in New York, he would scale back the burdensome taxes and regulations he and his fellow politicians impose.

A similar study by Cato's Dan Griswold further collapses the outsourcing fallacy. (More on that here.)

Protectionist Element #2: Baseless Fearmongering and the Media Who Love It. According to Schumer and his cohorts, Adidas' decision could result in the loss of "100 jobs" at the American Classic Outfitters' upstate New York plant. But there's only one problem: according to Hoovers.com (subscription), ACO only has 95 employees - total. Considering that ACO makes lots of other products, it would be practically impossible for the loss of one Adidas contract (a few thousand NBA jerseys per year) to result in ACO's complete liquidation. Instead, this is really a story about a Senator using his political power to intimidate one party to a contract dispute, a foreign company, to the benefit of the dispute's other party, his (voting and contributing) constituents. Yet the journalists covering this dispute mindlessly swallowed Schumer's fable hook, line and sinker. (For those of you keeping score at home, that's example 58654 of the media's pro-protectionism bias.)

Protectionist Element #3: Political Pandering. As noted above, Sen. Schumer is a notorious congressional protectionist who rarely misses an opportunity to demonize free trade and pander to his constituents. (Cato's free trade rating for Sen. Schumer is appropriately abysmal.) That said, Schumer has a history of really cranking up the protectionist rhetoric during an election year in order to get his constituents properly scared/angry and motivated. It's a racket that would make even Johnny Sack proud. For example, in Schumer's last election year (between January and November 2004) he attacked outsourcing (here and here); fought for high dairy tariffs in the US-Australia FTA; blocked milk imports; slammed Chinese apples; dropkicked Canadian beef; suckerpunched manufacturing imports; and, most notably, began his still-going jihad against China's currency policies (here, here and here).

And guess who's up for up for re-election in 2010? Yep, good ol' Chuck. Indeed, Schumer dropped the China currency demagoguery in 2008, but - what do you know! - just last month resumed his misguided efforts, championing the imposition of steep tariffs on all Chinese imports if China doesn't appreciate its currency. His timing is shocking, I know. (And nothing like a huge tax on most everything at your local WalMart and Target to really help struggling American families!)

Protectionist Element #4: Harmful Unintended Consequences, Absurd Logic and High Comedy. I initially planned to discuss the direct, yet unintended, consequences of Schumer's protectionism - i.e., higher uniform costs for NBA teams, passed on to NBA fans (who aren't Senators and get free Knicks tickets) through higher ticket prices. But a sports-executive-friend of mine tells me that uniform costs are typically less than 1% of a professional team's total budget, so my original argument would have been a little unconvincing. Nevertheless, Schumer's protectionist logic could quite easily produce tangible harms. As the Senator himself said, "Basketball is an American game," so why should we stop at ensuring US-made uniforms? And if the NBA forced its teams to use only American-made concessions, uniforms, shoes, equipment, construction materials, etc. etc., teams' bottom lines would implode. Under such a scenario, ticket prices would skyrocket, or the teams - who are already facing a very difficult 2010 - would collapse. Great strategy, huh?

But hey, why stop at just these things? In order to really ensure basketball's "American purity," let's replace all of the NBA's foreign-born players with more expensive, less qualified American substitutes. Just think of all the great NBA jobs that these foreigners are taking from our less-qualified American hoopsters! For some reason, however, I doubt that Schumer - a well-known New York Knicks fan - will follow his own advice and soon be demanding that the Knicks overhaul their roster by replacing Italian stud Danilo Gallinari (14 ppg) with an overpaid American stiff. (I hear Stephon Marbury's available! What could go wrong?) Moreover, I'm sure that Schumer's patriotic personnel demands would mesh perfectly with the NBA's new - and booming - international focus. How the hell did Toronto even get a franchise, anyway? Someone get Daniel Stern on the phone now!

On the bright side, absurd protectionist arguments like Schumer's are often ripe for mockery (beyond my suggested roster "improvements"). Indeed, the Schumer-Adidas episode actually has provided us with a classic visual that perfectly summarizes the idiocy of the modern protectionist's arguments. Here's the local video of the Senator trumpeting his strong defense of the NBA's "Americanism" (go to 0:23 or so):

That's right. Right as Schumer confidently asserts that "Basketball is America's game," the only jersey visible behind him belongs to none other than NBA superstar - and German-born player! - Dirk Nowitzki. Oops!

3 comments:

The only thing I miss about living in NY is being able to stay up on Chucks latest "dagger to the heart" comments and his hilarious camera hogging. What he will not do is address the real reason manufacturing jobs continue to bled out of NY and that is the mind numbing regulations and ridiculous taxation.

Upstate NY can always buy manufacturing jobs... The state government is blowing $1.2 billion on incentives (cash and tax breaks) for a semiconductor manufacturing plant. Somebody thinks the Albany NY area is going to be the next Austin. The dimwits haven't a clue. It's laughable, sad, and expensive.